London's sugar market shed early gains to close lower on Tuesday amid renewed roll-over activity by the funds, dealers said.
New York's return from a three-day holiday weekend and subsequent turn lower on carry-over triggered the downturn, they added.
Liffe October lost $4.5 to end at $238.5 a tonne after moving 2,639 lots between $244.4 and $237.6, taken from a daily tally of 5,825 lots.
December finished $5.5 down at $247.0 on 2,031 lots.
The October/December spread narrowed to a discount of $8.6 from an earlier high of $9.9.
Some traders said the downturn was to be expected given the recent rally and October's expiry next week and that a fresh advance higher might be expected later on.
"We're still quite positive on sugar. After last week's fund buying rally we felt that a period of consolidation was due," said one dealer.
On the fundamental side, Ukraine's state food industry department plans to ask the government to set a 200,000-tonne raw cane sugar import quota for 2005, sugar producers' association Ukrtsukor said on Tuesday.
Ukraine is allowing white sugar producers to import 125,000 tonnes of raw cane sugar under an import duty of 30 euros per tonne in 2004. The quota was sold for 7.5 million euros in June.